The Bakkafrost Group's farming segments had another challenging quarter, this week's Q3 report reveals.
Total earnings for the group reduced slightly during Q3. Bakkafrost reported a Q3 EBITDA of DKK 269 million, 8% lower than the same period last year. Profit was also down this quarter compared to last year, standing at DKK 219 million, a drop of DKK 30 million compared with Q3 2022.
Bakkafrost's fish meal, oil, and feed (FOF) segment was the best performer, with high profits for fish oil making what CEO Regin Jacobsen described as a "record-breaking quarter" for the segment, operated by subsidiary Havsbrún.
However, Bakkafrost's salmon farming business in both the Faroe Islands and Scotland lagged behind, with Jacobsen admitting, "we are not satisfied with the results from the farming segments in this quarter."
The farming operations experienced "surprisingly low" growth during Q3, Jacobsen said, meaning that Bakkafrost has decided to delay harvest until early next year, and has also reduced its harvest volume guidance from 93,000 tonnes to 73,000 tonnes.
“Both in the Faroe Islands and Scotland, we have decided to delay harvest into Q1 2024 to optimize average size of harvested fish," Jacobsen said.
Faroe Islands farming operations suffered a massive drop in earnings, with an operational EBIT down 61% compared with last year. Harvest volumes in the Faroes also dropped slightly during the third quarter, to 16,740 tonnes gutted weight, 1% down compared with Q3 2022.
Bakkafrost's Scottish operations continued with challenging conditions, running an operating loss of DKK 282 million (compared to last year's loss of DKK -180 million (EUR -24.1 million / USD -25.8 million). The total volume harvested in Q3 stood at 4,100 tonnes gutted weight, falling by 49% compared with Q3 2022.
Jacobsen said that in Scotland, the company had "some learnings from 2023" noting that 94% of mortalities were "second-summer fish", with mortalities increased in third-party smolt and certain genetic strains.
He reiterated the company's commitment to its in-house large smolt production, with the aim of providing robust, healthy stocks for its operations in both the Faroes and in Scotland.
In line with this, Jacobsen announced Bakkafrost was investing in a new hatchery in Skálavík in the Faroe Islands, adding to its 2 broodstock sites and 6 hatcheries in operation. Jacobsen said the broodstock sites are producing the Faroese strain of salmon eggs, which "give Bakkafrost a unique market position."
"Large smolt is the main driver behind Bakkafrost's strategy to reduce time in the marine phase, reducing risk and creating organic growth," Jacobsen said.
He added that smolt production in the Faroes is "steadily ramping up" and, once the new hatchery is completed, Bakkafrost's annual production capacity will be 24 million smolt at 500g size.
"The journey to large healthy smolt has not been a straight line," said Jacobsen. "Bakkafrost are a first mover on this, and we've taken some of the hits along the road."
Looking ahead to 2024, Jacobsen indicated large investment decisions will be put on hold while Bakkafrost recovers from its disappointing results in 2023.
"The bumpy road will definitely push some investments a bit back, to create better visibility before large investment decisions," Jacobsen said.